The New York Times published a guest essay by UW–Madison alumna Eleni Schirmer that is titled, “We’re Burying Our Kids in Debt (Just Not the Way You Think).”
Schirmer earned her PhD in 2021 from the School of Education’s Department of Educational Policy Studies and Department of Curriculum and Instruction. She currently works as a research associate with the Future of Finance Initiative at U.C.L.A.’s Luskin Institute on Inequality and Democracy.
In the essay, Schirmer reports that thousands of school districts across the country have turned to debt financing in order to cover budget shortfalls. She argues that not only has this failed to provide schools with sufficient funds, but it has long-term costs and traps schools in “cycles of austerity.”
It also “exacerbates the inequities public education is designed to address,” she says.
“At its most profound level, debt-financing public schools relies on problematic ideas of creditworthiness,” Schirmer writes. “For instance, Moody’s Investors Service, a pre-eminent credit-rating agency, bases a school district’s credit score on the district’s existing property value and residential income: The poorer the school district, the more it pays in interest and fees to borrow — from the point of view of creditors, such schools are ‘riskier.’”
“The results of this process are unsurprisingly classist and racist. Funding schools by way of credit scores amounts to little more than operating a system of prejudices which ordains the haves with the capacity to have more, while chaining the have-nots to financial hardship,” Schirmer adds.
Schirmer also argues that debt financing isn’t simply expensive and unequal — it’s anti-democratic. “Creditors and credit rating agencies loom over public institutions like shadow governance systems,” she says.
Shirmer notes that in the short-term, the Biden administration could provide schools with a much-needed cash injection, and the infrastructure plan may yield additional funds. However, she warns, “even this aid is vulnerable to private sector bond market obligations.”
Ultimately, Schrimer envisions a system where instead of debt financing, schools are funded through interest-free loans, or by taxing wealthy residents and corporations, “instead of borrowing from them and paying for the privilege of using their money.”
She asks, to conclude: “The money exists to transform this corrosive financial architecture; does the political will?”
To learn more about this important issue, check out the full essay on the New York Times website.